Guggenheim cuts its price target for CyberArk but sees risk/reward as "good" after the stock's post-earnings pullback
Shares of CyberArk (CYBR) are lower after the company reported better than expected fourth quarter results but with guidance that missed consensus estimates. Needham analyst Alex Henderson downgraded the stock to Hold given a margin outlook that he called "well below" expectations. More bullish on the stock, First Analysis analyst Howard Smith upgraded CyberArk to Strong Buy, saying the negative reaction to the company's below consensus outlook creates an attractive entry point.
RESULTS: On Wednesday, CyberArk reported fourth quarter earnings per share of 97c and revenue of $129.66M, both above consensus of 81c and $126.37M, respectively. For the first quarter, the company said it sees earnings per share between 35c-41c, with consensus at 56c, and revenue of $106M-$110M, below the expected $113.66M. Additionally, CyberArk said it sees fiscal year 2020 earnings per share between $2.26-$2.38 and revenue of $511M-$519M, with consensus at $2.79 and $510.36M, respectively, at the time of the report.
MOVING TO THE SIDELINES: While acknowledging that CyberArk posted a "solid" quarter with in-line revenue guidance, Needham analyst Alex Henderson downgraded the stock to Hold from Buy as its margin outlook is "well below" expectations, reflecting accelerated investments, biased toward building out cloud infrastructure and sales. The analyst added that the plans are an "expensive proposition," and the timing of revenue acceleration is not apparent. Henderson noted that he remains positive on CyberArk's position as the dominant vendor in on-premise privileged access management, or PAM, but argued that the company needs to work through its transition to subscriptions and address the more competitive landscape.
BUY CYBERARK: Meanwhile, First Analysis analyst Howard Smith upgraded CyberArk to Strong Buy from Outperform, with an unchanged price target of $154. The analyst told investors in a research note of his own that he believes the negative reaction to the company's below consensus outlook for fiscal year 2020 earnings is "overdone" and creates an attractive entry point given its "strong" fourth quarter results and execution in an attractive demand environment. Smith added that growth in the fourth quarter was spread across verticals, as government, pharmaceutical, healthcare, IT services, and media segments grew by over 40%, further noting that the management's outlook was likely "conservative."
Following the company's quarterly results, Guggenheim analyst Imtiaz Koujalgi lowered his price target for CyberArk to $134 from $155, but kept a Buy rating on the shares. Although the margin guidance was "a lot lower than we would have expected," the company typically guides conservatively, the analyst contended, adding that thinks the risk/reward "looks good" after the stock's post-earnings pullback.
PRICE ACTION: In afternoon trading, shares of CyberArk have dropped about 2.5% to $116.39.
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